DAVOS, Switzerland - World leaders and policymakers in Davos are nervous the global recovery could falter, especially if governments withdraw support too quickly. The recovery is "a mile wide but only an inch deep" and job creation very tentative, Canada's Prime Minister Stephen Harper told the World Economic Forum in Davos. He urged governments to keep economic support programmes in place. China's Vice Premier Li Keqiang said there were "twists and turns" ahead and vowed that China would maintain stable policies. "There still remain many uncertainties in (the) domestic and external economic environment," said Li, the man tipped to become China's next premier. "To tackle these problems, we will keep continuity and stability of our macroeconomic policies, continue to follow proactive fiscal policy and moderately easy monetary policy," he said. Markets were roiled this week on concerns China was tightening credit too quickly, which could upset a global recovery driven largely by rapid growth in Asia. He sent a reassuring message that China would not seek to upset recovery. South Korean President Lee Myung-bak, who heads the G20 this year, also urged member countries to tread gently as they begin to unwind extraordinary monetary stimulus measures. So far, Australia is the only major economy to have raised interest rates. Other central banks have started to withdraw the billions of dollars in extra cash pumped into the financial system to prevent a freeze-up and economic collapse. The International Monetary Fund, the policeman for the world economy, said it is best to go easy. "Don't exit too early, think about the long term," John Lipsky, First Deputy Managing Director of the International Monetary Fund, told Reuters. The speed of recovery varies greatly around the world, he said. The IMF this week raised its growth forecasts to a brisk 3.9 per cent for 2010 after 0.8 per cent contraction last year. But it comes thanks to the success of economic and monetary stimulus programmes estimated to have cost at least $5 trillion. Jaime Caruana, the head of the Bank for International Settlements, warned pulling out too soon risked potentially dangerous distortions in competition. "It's a narrow path," Caruana, told Reuters, arguing for a move "neither too early nor too late". Greece has brought the dangers of the aftermath of the credit crisis into sharp focus. Its budget deficit has ballooned and the premium on its government bonds reached a new record on Thursday on investor worries it cannot repay its debt, which would strain the resiliency of the euro zone.
